November 2018
Nowadays a lot of companies compensate at least a portion of their employees with equity incentives such as restricted stock and restricted stock units. Recently, the Belgian administration took a new position concerning the social security contributions that will have an impact on a lot of equity incentive plans.
According to the administration’s previous position, the equity incentives were subject to Belgian social security contributions if the incentives were granted by the Belgian employer. If the incentives were granted by a foreign company, the administration still considered them as being granted by the Belgian company if the latter actively intervened in the stock allocation process or if the costs related to the equity incentive plan were charged by the foreign entity to the Belgian company.
Very often, these conditions weren’t met. Foreign companies often didn’t charge the costs related to the plan to the Belgian company. As a result, in many cases the equity incentives were not subject to Belgian social security contributions.
In the instructions to employers, the Belgian administration changed its position. As of now, the equity incentives will be subject to Belgian social security contributions if they are granted for services provided by an employee in the context of his/her employment contract or if they are related to the employee’s function with his/her employer.
As a result of this new position equity incentives will almost always be subject to Belgian social security contributions for employers and employees. This will result in an extra cost for the employer of 25%.
Another outcome of this new position is that the equity incentives will also have to be included in the base for calculation of the holiday pay on the variable wage. This will result in an extra cost of more than 15% for employers.
Considering the new position of the Belgian administration, foreign companies who want to implement an equity incentive plan for Belgian employees are well advised to consider these extra costs.
It is important to note that the above mentioned is not a change in Belgian legislation but a change in position of the Belgian administration. One can raise the question of whether this new interpretation of the law by the social security administration is still in line with the text of the law itself. However, until this position has been successfully challenged before a Belgian court it is advised to follow it.
On a final note, it is important to mention that the Belgian government is also working on a new legislative proposal concerning the withholding taxes. Income taxes must be withheld by the Belgian employing company if the local employer grants the awards or is involved in the administration of the plan. In the government’s legislative proposal, the equity incentives granted to Belgian employees by foreign companies will also most likely become subject to Belgian withholding taxes. Details of these grants will have to be reported in the monthly wage income tax return and annual summary statements. This proposal however is not yet final.
Amelia De Grave
amelia.degrave@bdo.be